Fundamental
Overview
The upside for the Nasdaq
has been supported all along since the April 9 tariff pause by the lack of
bearish drivers. In fact, we continued to see a general de-escalation in trade
war that triggered a positive repricing in growth expectations and boosted risk
assets. Now, we reached the peak in this trade as we got the deals in the expected
10-20% range.
The focus now switched back
to the Fed and the interest rates path. The Fed’s decision this week was very much
expected and didn’t move the market at all. Rates were kept unchanged, and
Waller and Bowman dissented voting for a cut. The only change in the statement
was the removal of the line saying that “uncertainty has diminished”. That was
less dovish than expected but was ignored as everyone was focused on the Press
Conference.
The Press Conference is
what moved the market. In fact, the market was expecting Fed Chair Powell to
open the door for a rate cut in September conditional on the data, but he
didn’t say that. He just dodged the questions by telling reporters that they would
look at the totality of the data. That was interpreted as more hawkish than
expected.
The market dropped but the
losses were quickly erased following the strong beats from Microsoft and especially Meta.
Unfortunately, as it usually happens, earnings-driven moves were eventually
faded and the macro drivers got us to even lower prices.
The drop has likely been
driven by hedging activity into the NFP and potentially some tariff angst with
the higher rates for Canada and Switzerland.
The data is what really
matters now. Central banks don’t matter much because they don’t offer forward
guidance. They just delegate everything to the data. The data is what will
drive their decisions. Therefore, watch the data carefully because hawkish data
will likely trigger a correction as the market reprices expectations.
In the bigger picture,
given that the Fed’s reaction function remains to either wait more or cut, the
market should eventually get back to its upward trend (barring growth scares).
Nasdaq
Technical Analysis – Daily Timeframe
Nasdaq Daily
On the daily chart, we can
see that the Nasdaq is currently pulling back as the less dovish than expected
Powell triggered a hawkish repricing in interest rates expectations. We have an
upward trendline
defining the bullish momentum. The buyers will likely lean on it with a defined
risk below it to position for a rally into a new all-time high. The sellers, on
the other hand, will look for a break lower to increase the bearish bets into new
lows.
Nasdaq Technical
Analysis – 4 hour Timeframe
Nasdaq 4 hour
On the 4 hour chart, we can
see that we have another minor upward trendline that’s being challenged now.
The buyers will likely step in around these levels to position for a rally back
into the highs, while the sellers will keep pushing into new lows with a
defined risk above the trendline.
Nasdaq Technical
Analysis – 1 hour Timeframe
Nasdaq 1 hour
On the 1 hour chart, there’s
not much we can add here as the buyers will likely step in around these levels,
while the seller will keep pushing into new lows. We have a minor resistance
zone around the 23,400 level. If we get a pullback, that’s where we can expect
the sellers to step back in to target new lows, while the buyers will look for
a breakout to increase the bullish bets into a new all-time high. The red lines
define the average daily range for today.
Upcoming Catalysts
Today we conclude the week with the US NFP
report and the US ISM Manufacturing PMI.
